Case 1:16-cv-02488 Document 1 Filed 12/21/16 Page 1 of 15

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

SECURITIES AND EXCHANGE

COMMISSION,
Plaintiff,

Civil Action No.

v.
BRASKEM, S.A.,
Defendant.

COMPLAINT
Plaintiff Securities and Exchange Commission (the Commission) alleges:
SUMMARY
1.

This action arises from violations of the Foreign Corrupt Practices Act (FCPA)

by Braskem S.A. (Braskem or the Company), a Brazilian petrochemical company.

2.

Beginning in at least 2006 and through approximately 2014, Braskem paid bribes

to foreign political parties and foreign officials in the government of Brazil in order to assist
Braskem in obtaining or retaining business in that country. Braskem paid theses bribes through a
complex web of international intermediaries and offshore bank accounts. Certain senior
Braskem executives authorized and approved these payments while knowing that all or a portion
of the funds would be passed onto foreign officials in the government of Brazil.
3.

Braskem made approximately $250 million 1 in improper payments to an illicit

network that its controlling shareholder operated and used to make improper payments during
the relevant time period. At least $75 million of the amount paid into the illicit network was
1

Unless otherwise indicated, all dollar amounts are represented in U.S. dollars.

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used for bribes that directly benefited Braskem.

4.

The bribes Braskem paid during the relevant time period went to various foreign

officials in Brazil, including at least one official at Petrleo Brasileiro S.A. (Petrobras), the
Brazilian state-owned petroleum company, senators and representatives of the Brazilian
congress, and foreign political party officials with at least two leading political parties in Brazil.
5.

In exchange for the bribes, a government official at Petrobras intervened on

Braskems behalf in connection with the pricing formula for a 2009 supply agreement for the
purchase from Petrobras of naphtha, the raw material used in Braskems production of
petrochemicals. This favorable pricing formula reduced Braskems price of naphtha by
approximately $94 million from approximately March 2009 until February 2014.
6.

Braskem also received several tax credits and benefited from other legislative

measures over the relevant time period of time that allowed it to avoid approximately $187
million in consolidated expenses and costs. Finally, Braskem netted approximately $8 million
when certain executives at the Company bribed officials in the Brazilian government, who used
their influence with Petrobras to prevent Petrobras from terminating a joint venture agreement
involving a polypropylene plant. Petrobrass continued involvement in the polypropylene plant
made it more profitable for Braskem.
7.

The illicit payments were paid directly by Braskem, or by its Cayman Islands-

based subsidiary, Braskem Incorporated Ltd., to intermediaries disguised as export consulting

companies using accounts in the U.S., among other jurisdictions.
8.

Braskem and its subsidiary, at the direction of these senior executives, created

false books and records to conceal the bribe payments. These payments were improperly
recorded as legitimate commission expenses in Braskems books and records and were

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consolidated into Braskems financial statements. Braskems internal accounting controls were
inadequate because they failed to prevent such payments or detect red flags that should have
alerted its employees that these payments, in whole or in part, were fictitious and used to bribe
foreign officials.
9.

As a result of its conduct, Braskem violated Section 30A of the Securities

Exchange Act of 1934 (Exchange Act) [15 U.S.C. 78dd-1] when it authorized or paid bribes
to foreign political parties and foreign officials in the government of Brazil to influence their
decisions securing improper advantages or to induce them to use their influence to affect the acts
or decisions of a foreign government or instrumentality in order to assist Braskem in obtaining or
retaining business. Braskem violated Section 13(b)(2)(A) of the Exchange Act [15 U.S.C.
78m(b)(2)(A)] when it created false books and records to conceal the bribery scheme. Braskem
also violated Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. 78m(b)(2)(B)] by failing to
have sufficient internal accounting controls in place to detect and prevent the authorization of the
illicit payments over an extended period of time.
10.

Braskem is reasonably likely, unless restrained and enjoined, to continue to

engage in the acts and practices set forth in this complaint, and in acts and practices of similar
purport and object.
JURISDICTION AND VENUE
11.

This Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), and

27 of the Exchange Act [15 U.S.C. 78u(d), 78u(e), and 78aa].

12.

Braskem has shares registered with the Commission pursuant to Section 12(b) of

the Exchange Act and files periodic reports with the Commission. The shares registered are
represented by American Depositary Receipts that are traded on the NYSE under the symbol

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BAK. Braskems shares were registered with the Commission pursuant to Section 12(b) of the
Exchange Act [15 U.S.C. 781]. As such, Braskem was required to file reports, including Form
20-F, with the Commission pursuant to Section 13(a) of the Exchange Act [15 U.S.C. 78m],
and the related rules thereunder, and was an issuer within the meaning of the FCPA [15 U.S.C.
78dd-1, et seq.].
13.

Braskem, directly or indirectly, made use of the means or instrumentalities of

interstate commerce, of the mails, or of the facilities of a national securities exchange in

connection with the transactions, acts, practices, and courses of business alleged in this
Complaint.
DEFENDANT
14.

Braskem S.A. is a company headquartered in So Paulo, Brazil that produces

petrochemical and thermoplastic products. The Company is the largest producer of

thermoplastic resins in the Americas and the only producer of ethylene, polyethylene, and
polypropylene in Brazil. As of 2015, Braskem had approximately 8,000 employees and
approximately $47 billion reais in net sales.
RELATED ENTITIES
15.

Odebrecht S.A. (Odebrecht) is a privately-held company based in Brazil that

indirectly owned approximately 38% of Braskems outstanding share capital and approximately
50.11% of the Companys voting share capital directly or through a wholly-owned subsidiary
during the relevant time period. Odebrecht is the holding company of a conglomerate engaged in
engineering, oil and gas, real estate development, and other ventures. Odebrechts then chief
executive served as Chairman of Braskems board of directors during the relevant time period
and played a key role in Braskems involvement in the illicit bribery scheme alleged herein.

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16.

Petrleo Brasileiro S.A. (Petrobras) is an integrated energy company based in

Rio de Janeiro, Brazil with operations in about 28 countries. The company had securities
registered with the Commission, represented as American Depositary Receipts, which are traded
on the NYSE under the symbol PBR. As of December 31, 2015, the Brazilian federal
government held approximately 3.74 billion of the more than 7.4 billion Petrobras outstanding
common shares (or approximately 50.5%). As such, Petrobas was a state-owned enterprise and
its employees are foreign officials under the FCPA [15 U.S.C. 78dd-1(f)(1)(A)]. Petrobras
also owned approximately 36.07% of Braskems outstanding share capital and 47.03% of the
Companys voting share capital during the relevant time period.
17.

Braskem Incorporated Ltd. is a wholly-owned operating subsidiary of Braskem

based in the Cayman Islands.

FACTUAL ALLEGATIONS
A.
18.

The Illegal Payment Scheme

Beginning in approximately 2006, senior Braskem executives authorized and

directed the payment of bribes to foreign officials in the government of Brazil. As a result,
Braskem secured an improper advantage in order to obtain or retain business in Brazil.
19.

The bribery scheme used a complex network of offshore shell companies, bank

accounts located in traditional tax havens, individual currency dealers, and off-book financial
accounts in order to make improper payments to government officials, political parties, and
improper political campaigns contributions in Brazil. Former senior executives at Braskem
diverted Braskem funds into Odebrechts off-book accounts in or around 2006 to make these
illegal payments to foreign officials in the government of Brazil for the benefit of Braskem in
Brazil.

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20.

At the time, Odebrecht was Braskems controlling shareholder and had the power

to appoint or designate, and did appoint or designate Braskems CEO and CFO. Then senior
Braskem and Odebrecht executives during the relevant time period approved the funds that
Braskem diverted through Odebrechts off-book accounts.
21.

Braskem, directly or through its subsidiary, diverted funds into the Odebrechts

off-book accounts by fabricating commission and making payments into offshore bank accounts
controlled by three shell companies. The shell companies then facilitated the transfer of the
Braskem money into the Odebrecht off-books accounts that could then be used to make the
improper payments.
22.

Between approximately 2006 and 2014, Braskem diverted approximately $250

million into the Odebrecht off-book accounts in order to facilitate bribe payments to officials in
the government of Brazil to benefit Braskem in Brazil. Specifically, Braskem paid
approximately 87.5 million reais (valued at approximately $26 million presently) to one shell
company formed in June 2006 (referred to as Consultant A). Braskem paid 272.2 million reais
(valued at approximately $81 million presently) to another shell company also formed in June
2006 (referred to as Consultant B). Braskem also paid an additional 18.5 million reais (valued
at approximately $5.5 million presently) to Consultant A and Consultant B.
23.

Additionally, Braskem Incorporated Ltd. paid $1.9 million to Consultant A, $2

million to Consultant B, and $10.5 million to a third shell company (referred to as Consultant
C) during the relevant time period.
24.

The invoices these shell companies delivered to Braskem typically identified the

amount due as commissions on the amount FOB exports to your various customers during a
certain period of time. The invoices further referred to an export agency agreement. However,

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no export services were required for the customers or products involved in these dealings.
Additionally, no valid agency agreement existed. Thus, no commissions were ever incurred or
due on the exports or for the customers identified in the invoices. As a result, these invoices bore
no relation to any legitimate services that these entities rendered.
25.

Braskems payments to Consultant A and Consultant B were improperly recorded

in at least 926 general ledger entries at Braskem as Commissions Payable. Braskem

Incorporated Ltd.s payments to Consultant A, Consultant B, and Consultant C were improperly
recorded in at least 14 general ledger entries as Commissions Payable. Braskem Incorporated
Ltd.s payments were paid in U.S. dollars and, in some instances, through financial institutions in
the U.S. and its books and records were consolidated in Braskems financial statements filed
with the Commission.
26.

In all, Braskem, directly or through its subsidiary, paid approximately $250

million into Odebrechts off-book accounts. Former senior Braskem executives were aware at
the time they approved the payments that the funds paid to Consultant A, Consultant B, and
Consultant C would be passed, in whole or in part, on to government officials in the government
of Brazil, including the Petrobras and Brazilian party officials referred to in this Complaint.
a.

27.

Braskems illegal payments to Petrobras officials relating to a

polypropelyne plant located in Paulinia, Sao Paulo (Brazil)

In or around 2005, Braskem and Petrobras executed an agreement for a joint venture

between Petrobras and Braskem to build a plant. Due to public pressure, senior Braskem executives
feared that Petrobras intended to terminate the agreement even though early termination of the
agreement would have required Petrobras to pay Braskem an early termination penalty.
28.

At least two former senior Braskem executives met with Petrobrass chief

downstream officer (Brazilian Official A) and a Brazilian congressman (Brazilian Official

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B). Brazilian Official A and Brazilian Official B demanded that Braskem pay them, and
Braskem did pay them, approximately $4.3 million in exchange for their influence to prevent
Petrobras from terminating the agreement. The direct financial benefit to Braskem by avoiding
the early termination of this agreement was approximately 27 million reais (valued at
approximately $8.4 million presently).
29.

Braskem paid all of the approximately $4.3 million in bribes through Odebrechts

off-book accounts. Braskem mischaracterized the payments in its books and records as
Commissions Payable even though at least two of its then senior executives knew these funds
were reasonably likely passed through to foreign officials in Brazil. These payments were
consolidated in Braskems financial statements as legitimate business costs or expenses. As a
result, Braskem did not, in reasonable detail, accurately and fairly reflect these payments in its
books and records.
b.

30.

Braskems illegal payments to Petrobras officials relating to

the 2009 naphtha supply agreement

In or around 2008, Petrobras and Braskem began negotiating with Petrobras for a

supply agreement for the sale and acquisition of naphtha, a derivative from crude oil Braskem
uses in its petrochemical production. Braskem is Brazils largest consumer of naphtha and
purchases approximately 70% of its demand from Petrobras, the only Brazilian supplier of
naphtha.
31.

At and before this time, Petrobras determined the price for naphtha by using the

international market price for naphtha + $2. The international market price of naphtha is
historically linked to the Amsterdam-Rotterdam-Antwerp market price of naphtha (typically
referred to as ARA) and to the fluctuating reais/U.S. dollar exchange rate. In 2008, Petrobras
wanted to negotiate long term supply contracts directly with petrochemical companies such as
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Braskem.
32.

In or around late-2008, a former senior Braskem executive met again with

Brazilian Official A and Brazilian Official B to negotiate a long-term naphtha supply agreement
between Braskem and Petrobras.
33.

The former senior Braskem executive agreed to pay, and Braskem did pay,

Brazilian Official A and Brazilian Official B approximately $20 million over time. In return,
Brazilian Official A and Brazilian Official B used their influence over the contract approval
process at Petrobras to require that the naphtha supply contract with Braskem use a pricing
formula that reduced Braskems cost of naphtha.
34.

During the negotiations between Braskem and Petrobras from approximately

November 2008 until Braskem and Petrobras signed the naphtha supply contract in July 2009
(made retroactive to March 2009), Brazilian Official A represented Petrobras as its lead
negotiator.
35.

Brazilian Official A also used his influence over Petrobrass technical team and

the Petrobras executive board to approve a supply agreement that reduced Braskems cost of
naphtha by approximately $94 million from March 2009 through February 2014. Petrobras
terminated the contract in or around February 2014.
36.

During the relevant time period, Brazilian Official A met with former senior

Braskem executives on an annual basis to confirm and authorize the bribe arrangement. The
intermediary also met directly, or through an employee, with another former senior Braskem
executive to receive bank wire transfer information and to deliver wire transfer confirmations.
37.

Braskem paid all or a portion of the approximately $20 million in bribes through

Odebrechts off-book accounts. Braskem mischaracterized the payments in its books and

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records as Commissions Payable even though certain of its then senior executives knew these
funds were reasonably likely passed through to government officials in Brazil. These payments
were consolidated in Braskems financial statements as legitimate business costs or expenses.
As a result, Braskem did not, in reasonable detail, accurately and fairly reflect these payments in
its books and records.
c.

38.

Braskems illegal payments to officials in the Brazilian

federal legislature relating to several legislative measures

Beginning in or around 2006, senior Braskem executives agreed to pay bribes,

and Braskem did pay bribes, to foreign officials in the government of Brazil in exchange for
certain legislative measures that would benefit, and did benefit, Braskem. The measures
included, but were not limited to, passing a law allowing a tax credit for the purchase of naphtha
and expanding the credit to other raw materials used in the petrochemical industry.
39.

For example, prior to 2005 Brazilian law did not allow companies to take any tax

credit for the acquisition of naphtha. In 2005, the Brazilian congress passed a measure into law
that provided a 3.65% tax credit for the acquisition of naphtha. In 2013, the 3.65% tax credit
was expanded to include other raw materials Braskem acquired.
40.

As described herein, Braskem began diverting funds into Odebrechts off-book

accounts through Consultant A, Consultant B, and Consultant C in or around 2006. These funds
were ultimately passed on to officials in the government of Brazil as part of the illicit bribe
scheme described herein. A portion of the funds passed through Odebrechts off-book accounts
went to officials in the government of Brazil in exchange for the passing of the tax laws in 2005
and 2013.
41.

Specifically, three former senior Braskem executives agreed to divert Braskem

funds to two officials in the Brazilian senate and two Brazilian representatives in exchange for
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their influence to increase and extend the tax credit on naphtha to other raw materials that
Braskem acquires in the general course of its business. In all, Braskem illegally paid these
officials approximately 6 million reais, or approximately $1.74 million in or around October
2013.
42.

Moreover, a Braskem director instructed Braskem to divert approximately 100

million reais, or approximately $29 million, in funds through Odebrechts off-book accounts to
officials in one of Brazils leading political parties to use their influence in order to assist in
obtaining the result of increasing and extending the tax credit to include raw materials other than
naphtha.
43.

Braskems financial benefit from the 2005 tax credit was approximately 62

million reais, or approximately $19 million. Braskem also saved approximately $168 million
through the end of 2013 from the 2013 tax credit.
44.

The bribes paid to influence foreign officials to enact the tax credits were

processed through Odebrechts off-book accounts as payments to Consultant A, Consultant B,

and Consultant C, and recorded as Commissions Payable. These payments were consolidated in
Braskems financial statements as legitimate business costs or expenses. As a result, Braskem
did not, in reasonable detail, accurately and fairly reflect these payments in its books and records.
B.

45.

Lack of Compliance and Failure to Maintain

Adequate Internal Accounting Controls

During the relevant time period, Braskems policies, procedures, or controls did

not specifically address the FCPA. For example, Braskems Code of Conduct during the
relevant time period referred to employees relationship with clients and shareholders and
governed the use of privileged information. However, Braskems Code of Conduct in effect at

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the time failed to prohibit improper payments to foreign officials or political parties or reference
the FCPA.
46.

Braskem had an ethics committee comprising four full members, including a legal

representative, who decided matters relating to Braskems Code of Ethics and other policies.
Braskem employees were encouraged to report potential misconduct by Company employees,
third-party suppliers, and clients through an ethics line. The allegations contained in this
Complaint were never reported through Braskems ethics line or to its ethics committee even
though the improper payments were significant over time and the approval of such payments
involved certain senior Company managers who understood the purpose of the commission
payments to the intermediary companies.
47.

Braskems procurement and accounts payable processes during the relevant time

period lacked adequate payment approval standards and were easily manipulated by the senior
executives. For example, Company employees could manually add commission payments to
third parties without verification of the existence of a contract. The same employee that added
the commission payment could then send the request for payment without the need for approval
by a second employee.
48.

The improper payments to third-party agents such as Consultant A and Consultant

B could have been prevented or detected if Braskems internal accounting controls had required
the payments to be attached to a valid contract, which they did not. In fact, Braskem did not
have a valid agency or consulting agreement with Consultant A, Consultant B, or Consultant C.
The improper payments to Consultant A, Consultant B, and Consultant C were made without the
identification of a legitimate sale or a customer connected to the payment of the commission
remitted. As a result, Braskems limited internal procurement controls lacked the creation of

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records to provide reasonable assurances that payments were recorded as necessary to permit
preparation of financial statements in conformity with generally accepted accounting principles
in Brazil and the U.S. and failed to maintain accountability for its assets.
CLAIMS FOR RELIEF
FIRST CLAIM
Violations of Section 30A of the Exchange Act
49.

Paragraphs 1 through 48 are re-alleged and incorporated by reference.

50.

As described above, Braskem, through its officers, directors, employees, or agents

corruptly offered, promised to pay, or authorized unlawful payments to one or more persons,
while knowing that all or a portion of those payments would be offered, given, or promised,
directly or indirectly, to foreign officials for the purposes of influencing their acts or decisions in
their official capacity, inducing them to do or omit to do actions in violation of their lawful
duties, securing an improper advantage, or inducing such foreign officials to use their influence
with a foreign government or instrumentality thereof to assist Braskem in obtaining or retaining
business.
51.

By reason of the foregoing, Braskem violated, and unless enjoined, will continue

to violate, the anti-bribery provisions of the FCPA, as codified at Section 30A of the Exchange
Act [15 U.S.C. 78dd-1].
SECOND CLAIM
Violations of Section 13(b)(2)(A) of the Exchange Act
52.

Paragraphs 1 through 48 are re-alleged and incorporated by reference.

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53.

As described above, Braskem, through its officers, agents, subsidiaries, and

affiliates, failed to make and keep books, records, and accounts which, in reasonable detail,
accurately and fairly reflected its transactions and dispositions of its assets.
54.

By reason of the foregoing, Braskem violated, and unless enjoined, will continue

to violate, the books-and-records provisions of the FCPA, as codified at Section 13(b)(2)(A) of

the Exchange Act [15 U.S.C. 78m(b)(2)(A)].
THIRD CLAIM
Violations of Section 13(b)(2)(B) of the Exchange Act
55.

Paragraphs 1 through 48 are re-alleged and incorporated by reference.

56.

As described above, Braskem, through its officers, directors, employees, or agents

acting on its behalf, failed to devise and maintain a system of internal accounting controls
sufficient to provide reasonable assurances that: (i) payments were made in accordance with
managements general or specific authorization; and (ii) payments were recorded as necessary to
permit preparation of financial statements in conformity with generally accepted accounting
principles or any other criteria applicable to such statements, and to maintain accountability for
its assets.
57.

By reason of the foregoing, Braskem violated, and unless enjoined, will continue

to violate, the internal accounting controls provisions of the FCPA, as codified at Section
13(b)(2)(B) of the Exchange Act [15 U.S.C. 78m(b)(2)(B)].
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court enter a judgment:
A.

Permanently restraining and enjoining Braskem, and its officers, agents, servants,

employees, attorneys, and all person in active concert or participation with it who receive actual

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notice of this injunction by personal service or otherwise, from violating Sections 30A,
13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act [15 U.S.C. 78dd-1, 78m(b)(2)(A), &
78m(b)(2)(B)];
B.

Ordering Braskem to disgorge ill-gotten gains, illegal losses avoided, and unjust

enrichment obtained as a result of its illegal conduct;

C.

Granting such other and further relief as the Court may deem just and appropriate;

D.

Retaining jurisdiction over this action in order to implement and carry out the

and

terms of all orders and decrees that it may enter, or to entertain any suitable application or
motion by the Commission for additional relief within the jurisdiction of this Court.
Dated: December 21, 2016

Respectfully submitted,
/s/ David S. Johnson
David S. Johnson
Assistant Chief Litigation Counsel
D.C. Bar No. 477298
SECURITIES AND EXCHANGE
COMMISSION
100 F Street, N.E.
Washington, D.C. 20549
Direct Dial: (202) 551-2218
E-mail: johnsonds@sec.gov
Ernesto Palacios
Senior Counsel, FCPA Unit
Florida Bar No. 0529168
Direct Dial: (305) 982-6306
E-mail: palaciose@sec.gov
Attorneys for Plaintiff

Of Counsel:
Thierry Olivier Desmet
Assistant Director, FCPA Unit
Securities and Exchange Commission
801 Brickell Avenue, Suite 1800
Miami, Florida 33131
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